Shareholders May Be Wary Of Increasing South China Holdings Company Limited's (HKG:413) CEO Compensation Package

South China Holdings Company Limited (HKG:413) has not performed well recently and CEO Christina Cheung will probably need to up their game. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 22 June 2021. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for South China Holdings

Comparing South China Holdings Company Limited's CEO Compensation With the industry

Our data indicates that South China Holdings Company Limited has a market capitalization of HK$1.5b, and total annual CEO compensation was reported as HK$3.9m for the year to December 2020. Notably, that's a decrease of 13% over the year before. In particular, the salary of HK$3.64m, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations ranging from HK$776m to HK$3.1b, the reported median CEO total compensation was HK$1.4m. This suggests that Christina Cheung is paid more than the median for the industry. Moreover, Christina Cheung also holds HK$5.8m worth of South China Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	HK$3.6m	HK$4.2m	94%
Other	HK$218k	HK$220k	6%
Total Compensation	HK$3.9m	HK$4.4m	100%

On an industry level, around 72% of total compensation represents salary and 28% is other remuneration. According to our research, South China Holdings has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at South China Holdings Company Limited's Growth Numbers

Over the last three years, South China Holdings Company Limited has shrunk its earnings per share by 33% per year. Its revenue is down 7.3% over the previous year.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has South China Holdings Company Limited Been A Good Investment?

With a total shareholder return of -55% over three years, South China Holdings Company Limited shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 3 warning signs for South China Holdings (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Switching gears from South China Holdings, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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